What Is Assessed Value?

Assessed value is the dollar value assigned to a home or other piece of real estate for property tax purposes. It takes into account the value of comparable properties in the area, among other factors. In many cases, the assessed value is calculated as a percentage of the fair market value of the property.

Understanding Assessed Value

The assessed value of a home or other property is used only to determine the applicable property tax (also known as an ad valorem tax).

Assessed value takes into account the overall quality and condition of the property, local property values, square footage, home features, and market conditions. Many of these factors are derived from computerized real estate data for the property's neighborhood and the surrounding area.

Local Government Assessors

A government assessor is responsible for assigning a property's assessed value and for updating it periodically.

Government assessors are usually designated by specified tax districts. Each district may have a different procedure for calculating assessed value. However, the basic process is largely the same.

Depending on the state and locality, assessors may be required to personally visit properties periodically for assessment purposes. Owners who want to dispute the assessed value placed on their property can request a reassessment, which is a second evaluation of the property.

The assessed value may be lower for a property if you are an owner-occupant as opposed to a landlord (this is sometimes called a homestead exemption). That doesn’t affect the market value of the property but can reduce your property tax bill.

How Assessed Value Is Calculated

In most states and municipalities, assessed value is calculated as a percentage of the property’s fair market value. The percentage rate used can vary considerably from one place to another.

For example, at 10%, Mississippi uses one of the lowest percentage rates in the nation for owner-occupied, single-family homes to establish assessed value. By contrast, Massachusetts uses a very high percentage rate of 100%.

Once the assessed value is known, property taxes can then be determined.

Assessed Value and Property Taxes

The assessed value of your home is only one factor used to calculate your property taxes. Many tax authorities use an equation such as the following, which typically includes a millage rate, or tax rate:

Fair Market Value × Assessment Rate × Millage Rate = Effective Property Tax

The millage rate is the tax rate applied to the assessed value of the property. Millage rates are typically expressed per $1,000, with one mill representing $1 in tax for every $1,000 of assessed value. So, for calculation purposes, if the mill rate in your jurisdiction is 20, divide that by 1000 to get .02. Then apply that figure to the calculation.

Example

Say that a house in your area has a fair market value of $300,000. The area's assessment rate is 50%. And the mill rate is 20. Using the formula shown above, the property tax would be $3,000: $300,000 × 0.50 × 0.02 = $3,000

Personal Property Taxes

In addition to a real estate tax, many states impose a tax on certain personal property. Similarly, this tax usually is based on the personal property’s assessed value. Types of personal property that are taxed can include mobile homes, cars, motorcycles, and boats. Rates can vary widely as well, depending on where you live.

The Bottom Line

Assessed value refers to the value assigned a property, such as a home, by the local government. It is used by the tax authority to determine the property taxes that a homeowner owes. Often, it's calculated as a percentage of the fair market value of the property.